All Hail Our New Lord and Master, the Stock Market

October 29, 2015

We're all minions now of the stock market.

The all-powerful Federal Reserve is a mere minion of the stock market,
a kitten absurdly claiming in public to be a tiger. If the market threatens to drop,
the Fed quickly prostrates itself and does the bidding of its Lord and Master: "No
rate hikes, minions!"

By cowering in terror of a stock market tantrum, the Fed has surrendered everything:
its vaunted (and completely phony) independence; its duty (yes, go ahead and laugh)
to the nation and the real economy--everything.

The Fed is nothing but an abject slave of the market. It masks its servitude
with Newspeak, but the reality it has only two choices: burn the market down with a
series of rate hikes or surrender completely to the market, relinquishing any
pretense of power or control.

The Fed is not alone; the entire financial-political system is now beholden to
the stock market.

Want to impose real restrictions on the financial sector? Forget it, Congress--the market
will rebel. And if the market sags--you'll cave in like all the market's servile minions
because a significant chunk of your campaign contributions come from those profiteering
off the market.

Corporate America--don't dare miss your quarterly earnings number or you
will suffer the wrath of a market that destroys all who don't obey its
demands for short-term profits at the expense of long-term profitability.
Were the management of a public company bold enough to sacrifice short-term profits
for long-term growth, they wouldn't survive the market's destruction of their
stock price.

The stock market now dictates fiscal and monetary policy within the Empire
because the American economy has been fully financialized. Profits flow
not from innovation in products and services but from the financialization
of every income stream.

While definitions of financialization vary, mine is:

Financialization is the mass commodification of debt and debt-based financial
instruments collaterized by previously low-risk assets, a pyramiding of risk and
speculative gains that is only possible in a massive expansion of low-cost credit
and leverage.

Another way to describe the same dynamics is: financialization results when
leverage and information asymmetry replace innovation and productive investment
as the source of wealth creation.

When the profits from financializing collateral and leveraging those bets to the
hilt far exceed generating wealth by creating products and services, the economy
is soon hollowed out as the perverse incentives of financialization start driving
every business and political decision and strategy.

Even Darth Vader now takes orders from the stock market:

We're all minions now of the stock market. All hail our Lord and Master,
the stock market.

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